Richard N. Cooper
The international monetary system -- the rules and conventions that govern financial relations between countries -- is an important component of international relations. When monetary relations go well, other relations have a better chance of going well; when they go badly, other areas are likely to suffer too. Monetary relations have a pervasive influence on both domestic and international economic developments, and history is strewn with examples of monetary failure leading subsequently to economic and political upheaval. Recent years have seen considerable turmoil in international monetary relations, and a marked deterioration in relations between Europe, Japan, and America. Ideally, monetary relations should be inconspicuous, part of the background in a well-functioning system, taken for granted. Once they become visible and uncertain, something is wrong.
As a consequence of this recent turmoil, intense official discussions on the nature and the future of the monetary system were belatedly begun in late 1972, under the auspices of the International Monetary Fund ( IMF). A year later, little real progress in these discussions could be recorded (official press releases to the contrary notwithstanding). De facto monetary relations between countries were on a radically different course from the official discussions.
Many intricate details attend consideration of alternative monetary arrangements, and the details are often vitally important. It is not possible, however, to discuss them all in an essay charged with covering a broad spectrum of possible monetary arrangements and the broad implications of alternative monetary arrangements for the world as a whole, for groups of particular countries, and for particular groups within countries.
This essay has a somewhat more limited purpose. It attempts to survey systematic various possible types of international monetary regimes, to identify criteria for choice between alterntive monetary regimes, and to discover the
Richard N. Cooper is a professor of economics at Yale University in New Haven, Connecticut.